There are a few key trends to look for if we want to identify the next multi-bagger. Typically, we'll want to notice a trend of growing return on capital employed (ROCE) and alongside that, an expanding base of capital employed. If you see this, it typically means it's a company with a great business model and plenty of profitable reinvestment opportunities. So when we looked at the ROCE trend of Inner Mongolia Xingye Silver &Tin MiningLtd (SZSE:000426) we really liked what we saw.

What Is Return On Capital Employed (ROCE)?

For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Inner Mongolia Xingye Silver &Tin MiningLtd is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.25 = CN¥2.2b ÷ (CN¥11b - CN¥2.5b) (Based on the trailing twelve months to September 2024).

Therefore, Inner Mongolia Xingye Silver &Tin MiningLtd has an ROCE of 25%. That's a fantastic return and not only that, it outpaces the average of 6.8% earned by companies in a similar industry.

Above you can see how the current ROCE for Inner Mongolia Xingye Silver &Tin MiningLtd compares to its prior returns on capital, but there's only so much you can tell from the past. If you're interested, you can view the analysts predictions in our free analyst report for Inner Mongolia Xingye Silver &Tin MiningLtd .

So How Is Inner Mongolia Xingye Silver &Tin MiningLtd's ROCE Trending?

The trends we've noticed at Inner Mongolia Xingye Silver &Tin MiningLtd are quite reassuring. Over the last five years, returns on capital employed have risen substantially to 25%. The amount of capital employed has increased too, by 45%. So we're very much inspired by what we're seeing at Inner Mongolia Xingye Silver &Tin MiningLtd thanks to its ability to profitably reinvest capital.

The Bottom Line

In summary, it's great to see that Inner Mongolia Xingye Silver &Tin MiningLtd can compound returns by consistently reinvesting capital at increasing rates of return, because these are some of the key ingredients of those highly sought after multi-baggers. And a remarkable 197% total return over the last five years tells us that investors are expecting more good things to come in the future. In light of that, we think it's worth looking further into this stock because if Inner Mongolia Xingye Silver &Tin MiningLtd can keep these trends up, it could have a bright future ahead.

On the other side of ROCE, we have to consider valuation. That's why we have a FREE intrinsic value estimation for 000426 on our platform that is definitely worth checking out.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.